Australia's largest stock trading and investment forum Australia's #1 stock forum

SGH

Click for more information

0.00%

54.5¢ slater & gordon limited

Will the H1 results be delayed?, page-23

First 23 Last

Share
Profile

Follow
mirren

12,268 Posts.

387

27/02/17

00:08

Post #: 22919666
Share

Originally posted by mike8654 ↑

"Given that SGH has leave to file cross claims against its DD advisers on or before 27/4/17, it might be very interesting indeed."

The possible conflict of interest problem may not be such an issue if it was only EY in the UK involved in the DD.

On the DD liability issue:

What SGH thought they were buying with the PSD business, and what they got, is obviously the issue - and the problem for the group.

The PSD Acquisition document used Quindell 2014 accounts to come up with adjusted PSD revenue of GBP368M, and EBITDA of GBP70M.

This was the basis of the projected earnings per share increase of between 15% and 40% for 2016 FY for SGH in the acquisition document.

The re-stated Quindell accounts for 2014 gave a completely different view of PSD - revenue of only GBP220M, and EBITDA of negative GBP130M or so.

The revenue for PSD after it was bought by SGH (2016 FY) was more or less in line with the Quindell restated accounts - Revenue of about GBP240m.

Actual 2016 EBITDA for PSD was much better than Quindell restated 2014 accounts would have suggested (result was not far off break even) - but obviously break-even is a long way below the GBP70M minimum expected in the Acquisition document for 2016.

It's this lack of EBITDA in the PSD business, as well as lower than expected revenue, which was the basis of the big impairments on the 2016 SGH accounts.

Sorting out responsibility for the overly optimistic EBITDA figure in the acquisition document doesn't look like an easy task.

What would be the likelihood of success of a claim against the DD advisers ?

The issues in the Quindell accounts were known about prior to the purchase - and prior to the date of the acquisition document (30 Mar 2015).

The contents of DD reports will no doubt have all the usual boilerplate caveats and limitations on the advice being given, and statements that the advisers had relied on 3rd parties as the basis for advice etc etc.

There is the issue of what was in the various DD reports. Did the board decide to proceed with the purchase notwithstanding warnings were given ?

Warranties on the sale apparently excluded losses arising from Quindell accounting policies (whatever the implications of that are for DD).

And was any DD adviser responsible for pulling all DD reports into a final report or recommendation - or was that done by management ?

Was it a case of an eager buyer being egged on by advisers who stood to do very well out of share offerings / underwriting and debt financing etc - a case of everyone on the flight deck wanting to get airborne regardless.

Unfortunately we may never know all the answers.

Expand

Mike - am I totally off the planet in thinking you are a lawyer trying to work out what the lawyers are going to do with all this ?
Never ends the endless arguments that lawyers create to continue to litigate -
It truly amazes me how complicated this discussion has become - when in essence they paid a lot more for a company than what it was worth- and worse they paid heaps of money to get the DD and didn't either read it or understand it-
Is that too simple - I think not-
Watching the dance that lawyers do is amazing -

SGH Price at posting: 16.0¢ Sentiment: None Disclosure: Not Held
3 Upvote

0 Great analysis

Reply

Top Stories

KGL

KGL hits copper-silver-gold-zinc-lead massive sulphide intersection in NT

ABY

Adore Beauty appoints former David Jones exec as new CEO

IDA

Indiana Resources to win US$90M from Tanzania following international lawsuit

BC8

Black Cat Syndicate one pour away from being rerated as producer

ARU

Arafura updates gas supply agreement with Mereenie JV for 16.4PJ supply to Nolans REE play

There are more pages in this discussion • 7 more messages in this thread...

First 23 Last

Add SGH (ASX) to my watchlist